NAGINDAS KHANDWALA COLLEGE OF COMMERCE, ARTS, SCIENCE AND

MANAGEMENT STUDIES

MALAD (WEST), MUMBAI- 400067

SUBMITTED BY:
ISHA SHAH

T.Y.B.M.S-A

SEMESTER V

PROJECT REPORT ON:

A STUDY ON BANCASSURANCE

PROJECT GUIDE:
PROF. SONALI SINGH

SUBMITTED TO:
UNIVERSITY OF MUMBAI

ACADEMIC YEAR
2018-19
 ACKNOWLEDGEMENT

Words fall short to express my deep sense of gratitude towards all who have imparted their
valuable time, energy and intellect towards the beautification of my project

I take this opportunity to thank UNIVERSITY OF MUMBBAI for giving me chance to

do this project.

.
I would also like to thank our Principal Dr. ANCY JOSE and our Vice Principal Dr.
MONA MEHTA

I would like to thank our BMS Coordinator PROF. G.H.RAO for his moral support and
guidance

I would like to thank PROF. SONALI SINGH, the guide for giving the valuable
suggestion and guidance

It gives me immense pleasure to present this project in the course of Bachelor of

Management Studies (BMS), and I also would like to share the credit with our college
library, for its valuable help in this project. I would like to thank all those people who gave
me their opinion without their help this project would not be possible to submit on time.
 INDEX

Sr. TOPIC Pg. No.

No
1.
 Executive Summary

Bancassurance is a French term referring to the selling of insurance through a bank’s

established distribution channels. In other words we can say Bancassurance is the
provision of Insurance products by a bank. Bancassurance was originated in France
in 1980’s & then it was widely spread across Europe. This Concept was introduced in
India in 1999.

Bancassurance is gaining popularity day-by-day. This report provides a bird’s eye view of
the current situation of Bancassurance. It also discusses about the importance of
bancassurance in today’s economy. The Banking and Insurance industries have changed
rapidlyt he c h a n g in g a n d c ha lle n g i n g e c o n o mic e n v ir o n me n t t h r o u g h o u t t h
e world.In this competitive and liberalized environment everyone is trying to do better than
others and consequently survival of the fittest has come into effect.

I would like to present my project “BANCASSURANCE” (an emerging concept in

India).The project flashes some light on Bancassurance and how it is perceived by people
in India. It deals with the conceptual part of Bancassurance. The main focus of this project
is on benefits and importance of Bancassurance. The regulations governing Bancassurance
areal so dealt with in this project. SWOT analysis is also done so as to identify the various
opportunities and threats for Bancassurance in India.
 NEED AND OBJECTIVE OF THE STUDY

Need for the study and Statement of the Problem

Despite the increasing importance of Bancassurance, there is little or no direct

empirical data available on the potential benefits of the Bancassurance model(s)
for distribution of insurance practiced at India and the related sources of those
benefits. With the privatization of the insurance sector and subsequent
permission of government for banks and insurance company tie-ups for
distribution of insurance products, the multinational and Indian private sector
banks have done a good job on the sales of insurance products. However, the
sales are primarily made to bank customers with whom the banks have very
significant relationships. Whether banks can sustain sales to customers over and
above the ones who are already there and what is the contribution of
Bancassurance to the premium income for insurance companies is a matter of
research.

Objectives of the Study

Primary Objectives

• To study whether selling through banks (Joint Ventures and Distribution

Agreements) is more effective for insurance companies than selling through
other channels such as Agency and the Alternate Channel.
• To study the effect of the present Distribution Agreement model of
Bancassurance practiced at India, and compare the benefits with the three basic
models of Bancassurance namely Joint Venture, Strategic Alliances and the
Financial Services Group (Investment Option) practiced in different countries
namely Japan, Thailand, Europe and USA etc. and suggest suitable changes in
the present model or a new model for the Indian insurer.

Secondary Objectives
• Identify the various mechanisms to examine whether Bancassurance increases
both internal and external customer satisfaction
. • Study the earnings through Bancassurance for insurance companies and
banks respectively.
 RESEARCH METHODOLOGY

Type of Research: Descriptive Research

Research Design:
Descriptive research is used to study the effect of the partnerships between
banks and insurance companies based on the performance of both and the
satisfaction level of internal and external customers.

Sampling:

Cluster sampling is used for the selection of respondents.

No of respondents: 85

Hypothesis (Null Hypothesis)

Hypo 1: There is no difference between purchasing through banks and through
other channels of distribution.
Hypo 2: There is no significant impact on the level of internal customer
satisfaction from the Bancassurance tie-up with a particular bank.
Hypo 3: There is no significant impact on the level of internal customer
satisfaction from the Bancassurance tie-up with a particular life assurance
company.
Hypo 4: External customer satisfaction is not influenced by purchase of a life
assurance policy through the Bancassurance channel
Hypo 5: Income and insurance purchased have a positive correlation
 CHAPTER 1.INTRODUCTION

‘BANCASSURANCE’ as term itself tells us what does it means. It’s a combination

of the term ‘Bank’ and ‘Insurance’. It means that insurance have started selling there
product through banks. It’s a new concept to Indian market but it is very widely
used in western and developed countries. It is profitable both to Banks and
Insurance companies and has a very bright future to be the most develop and
efficient means of distribution of Insurance product in very near future.

Insurance company can sell both life and non-life policies through banks. The share
of premium collected by banks is increasing in a decent manner from the time it was
introduce to the Indian market. In India Bancassurance is guide by Insurance
Regulatory and Development Authority Act (IRDA), 1999 and Reserve Bank of
India. All banks and insurance company have to meet particular requirement to get
into Bancassurance business.

It is predicted by experts that in future 90% of share of premium will come from
Bancassurance business only. Currently there are more and more banking and
Insurance Company and venturing into Bancassurance business for better business
prospect in future.

The banking business is also generating more profit by more premium collected by
them and they also receive commission like normal insurance agent which increase
there profits and better reputation for the banks as there service base also increase
and are able to provide more service to customers and even more customer are
attracted toward bank.

It is even profitable for Insurance Company as they receive more and more sales and
higher customer base for the company. And they have to directly deal with an
organization which reduce there pressure to deal with each customer face to face.

In all Bancassurance has proved to be boom in whole Banking and Insurance arena.

Bancassurance is defined as ‘Selling Insurance products through banks’. The word

is a combination of two words ‘Banc’ and ‘assurance’ signifying that both banking
and insurance products and service are provided by one common corporate entity or
by banking company with collaboration with any particular Insurance company. In
concrete terms bancassurance, which is also known as Allfinanz - describes a
package of financial services that can fulfill both banking and insurance needs at the
same time.

Financial Services

Banking Insurance

Bancassurance

The usage of the word picked up as banking and insurance companies merged
together and banks sought to provide insurance, in the market which has been
liberalized recently.
But it is a controversial issue as many experts feels that this ides gives banking
sector too great a control over financial market in that country. Therefore it has also
been restricted in many countries too.

But, still which countries have permitted Bancassurance in their market has seen a
tremendous boom in that sector. The share of premium collected by them has
increased in constant and decent manner. This success coincided with a favorable
taxation for life insurance products, as well as with the consumers' growing needs,
in terms of middle and long term savings, which is due to an inadequacy of the
pension schemes in India.
The links between bank and insurance takes place through various ways
(distribution agreements, joint ventures, creation of a company new company)
which gives rise to a complete upheaval concerning marketing strategies and the
setting up of insurance products' distribution. More and better insurance starts
coming in market.

This stream of market has just been opened very recently for the Indian market and
there is lot of development left to be done by the government and regulatory
authority. But this has proven to be a boom for the Insurance and Banking
companies together and both the different sector of the industry has shown better
result and improvement in their own field due coming of the whole new concept of
BANCASSURANCE.

Bancassurance in its simplest form is the distribution of insurance products through

a bank’s distribution channels. It is the provision of insurance and banking products
and service through a common distribution channel or through a common base.

Banks, with their geographical spreading penetration in terms of customer’s reach of

all segments, have emerged as viable source for the distribution of insurance
products. It takes various forms in various countries depending upon the
demography and economic and legislative climate of that country. This concept
gained importance in the growing global insurance industry and its search for new
channels of distribution.
However, the evolution of bancassurance as a concept and its practical
implementation in various parts of the world, have thrown up a number of
opportunities and challenges.

The concept of bancassurance was evolved in Europe. Europe leads the world in
Bancassurance market penetration of banks assurance in new life business in Europe
which ranges between 30% in United Kingdom to nearly 70% in France. However,
hardly 20% of all United States banks were selling insurance against 70% to 90% in
many Western European countries. In Spain, Belgium, Germany and France more
than 50% of all new life premiums is generated by banks assurance. In Asia,
Singapore, Taiwan and Hong Kong have surged ahead in Bancassurance then that
with India and China taking tentative step forward towards it. In Middle East, only
Saudi Arabia has made some feeble attempts that even failed to really take off or
make any change in the system.
The motives behind bancassurance also vary. For Banks, it is n means of product
diversification and source of additional fee income. Insurance companies see
bancassurance as a tool for increasing their market penetration and premium
turnover. The customer sees bancassurance as a bonanza in terms of reduced price,
high quality products and delivery at the doorsteps.

With the liberalization of the insurance sector and competition tougher than ever before,
companies are increasingly trying to come out with better innovations to stay that one-step
ahead.

Progress has definitely been made as can be seen by the number of advanced products
flooding the market today - products with attractive premiums, unitized products, unit-
linked products and innovative riders. But a hitherto untapped field is the one involving
the distribution of these insurance products.

Currently, insurance agents are still the main vehicles through which insurance products
are sold. But in a huge country like India, one can never be too sure about the levels of
penetration of a product. It therefore makes sense to look at well-balanced, alternative
channels of distribution.

Nationalized insurers are already well established and have an extensive reach and
presence. New players may find it expensive and time consuming to bring up a distribution
network to such standards. Yet, if they want to make the most of India's large population
base and reach out to a worthwhile number of customers, making use of other distribution
avenues becomes a must.

Alternate channels will help to bring down the costs of distribution and thus benefit the
customers
What is Bancassurance?

Bancassurance is the distribution of insurance products through a bank's distribution

channels. It is a service that can fulfill both banking and insurance needs at the same time.
Bancassurance as a concept first began in India when the insurance industry opened up to
private participation in December 1999. There are basically four models of bancassurance:

 Distribution alliance between the insurance company and the bank.

 Joint venture between the two companies.
 Mergers between a bank and insurer.
 Bank builds or buys own insurance products.

Most of the bancassurance operations fall in the first model.

How does it help?

 Every insurance company has a wants to grow quickly to reduce painful start-up
expense overruns. Banks with their huge networks and large customer bases give
insurers an opportunity to do this efficiently.
 It gives the companies an opportunity to tap the rural sectors. Selling insurance
through traditional methods in these sectors falls very expensive. A tie up with a
bank with an appropriate customer base can give an insurer a cheap access to these
areas.
 Bancassurance enables to have a huge pool of skilled professionals.
 The margins of the banks in their core lending business are declining sharply.
Opportunities like bancassurance augment their income.
 Bancassurance enables to develop a sales culture within the bank. It helps to change
the traditional mindset of banking companies.

Though a relatively new concept, bancassurance has been a phenomenal success in most of
the cases. Currently banks are not just lending organizations but are emerging as more
diverse financial institutions. The distribution of insurance products through banks has
been beneficial to both insurance and banking companies as well as the customers
Why should Banks enter Insurance?

There are several reasons why banks should seriously consider Bancassurance, the most
important of which is increased return on assets (ROA). One of the best ways to increase
ROA, assuming a constant asset base, is through fee income. Banks that build fee income
can cover more of their operating expenses, and one way to build fee income is through
the sale of insurance products. Banks that effectively cross-sell financial products can
leverage their distribution and processing capabilities for profitable operating expense
ratios.

By leveraging their strengths and finding ways to overcome their weaknesses, banks could
change the face of insurance distribution. Sale of personal line insurance products through
banks meets an important set of consumer needs. Most large retail banks engender a great
deal of trust in broad segments of consumers, which they can leverage in selling them
personal line insurance products. In addition, a bank’s branch network allows the face to
face contact that is so important in the sale of personal insurance.

Another advantage banks have over traditional insurance distributors is the lower cost per
sales lead made possible by their sizable ,loyal customer base. Banks also enjoy significant
brand awareness within their geographic regions, again providing for a lower per-lead cost
when advertising through print, radio and/or television. Banks that make the most of these
advantages are able to penetrate their customer base and markets for above-average market
share.

Other bank strengths are their marketing and processing capabilities. Banks have extensive
experience in marketing to both existing customers (for retention and cross selling) and
non-customers (for acquisition and awareness). They also have access to multiple
communications channels, such as statement inserts, direct mail, ATMs, telemarketing,
etc. Banks' proficiency in using technology has resulted in improvements in transaction
processing and customer service.

By successfully mining their customer databases, leveraging their reputation and

'distribution systems’ (branch, phone, and mail) to make appointments, and utilizing 'sales
techniques’ and products tailored to the middle market, European banks have more than
doubled the conversion rates of insurance leads into sales and have increased sales
productivity to a ratio which is more than enough to make Bancassurance a highly
profitable proposition.
 CHAPTER 2. BANKING ON BANCASSURANCE

Though much ado was made about bancassurance, an alternate channel to hawk risk
products through banks, the channel is yet to pick up pace as of today. Most of the
insurance companies have already tied up with banks to explore the potential of the
channel that has been a success story in Europe and legislations are also in place. For
insurance companies and banks the convergence brings about benefits for both but then
what’s stopping it from taking off in a big way?

Bancassurance primarily banks on the relationship the customer has developed over a
period of time with the bank. And pushing risk products through banks is a cost-effective
affair for an insurance company compared to the agent route, while, for banks, considering
the falling interest rates, fee based income coming in at a minimum cost is more than
welcome.

SBI Life Insurance Company a predominant player in bancassurance is positive about the
channel bringing about a transformation in the way insurance has been sold so far.RBI
guideline for banks entering into insurance sector provides three options for banks. They
are:

Emphasizing heavily on bancassurance and plans to explore the potential of State Bank of
India’s 9000 plus branches spread across the country and also its 4000 plus associate banks
- one of the reasons why SBI Life Insurance is not laying much emphasis on increasing its
agent force from the present 3000.

The company plans to appoint Certified Insurance Facilitators (CIFs) in a phased manner
at its branches. For now around 320 CIFs, one from each of its bank branches have been
identified for the purpose in addition to setting up insurance counters at its banking outlets.
The number is expected to go up to 500. ‘Out of our present business of around Rs 150-
200 crore bancassurance has brought in 50 percent while corporate agency and the agent
channel have contributed about 10 percent and 40 percent respectively’, says Pradeep
Pandey, Head, PR, SBI Life Insurance Company. The company aims at acquiring 75
percent of the total business through bancassurance and the balance through the other
channels by 2007.

Various models are used by banks for bancassurance. One is the insurance salesman of the
respective company being posted in the bank, the other is where a select group of wealth
management people of the bank sell insurance and the third is where the bank employees
are incentivized to hawk insurance products.

But the pertinent question is how far bancassurance will succeed when insurance is a
product that is sold not bought in our country. Insurance needs hard selling but banks have
never been aggressive about selling financial products. Says Pradeep Pandey’ I agree that
in our country

Insurance awareness is low but with falling interest rates, banks are on the look out for
additional revenue and bancassurance can provide them fee based income –insurance is
one outlet where income can be gained. And the cost that banks have to incur is minimal.
With all the other infrastructure in place already, the cost is only about training a few
individuals’.

And will products sold through bancassurance be any different? ‘The products sold will be
the same. In the first phase we plan to sell endowment and pension’ opines Mr. Pandey,
SBI Life Insurance. On the contrary Shivaji Dam, CEO, OM Kotak Mahindra Life
Insurance begs to differ, ‘Yes products will have to be different to be sold through
bancassurance. They will have to be term and savings products with not much of
complications. In other words products that are static and simple’

OM Kotak Mahindra Life Insurance has tied up with Dena Bank and its own Kotak Bank
for bancassurance. The company is targeting around 10 percent of the business during its
start up phase. Adds Shivaji Dam,’ Our focus will not be the affluent class but the middle
class’ But in case of SBI Life there is no such emphasis on a segment of the population
perhaps considering the wide reach its bank branches have even in the remotest corners of
the country. Also SBI Life plans to offer its complete basket of products but OM Kotak
will be selling select products.

Insurers are no doubt optimistic about the channel but it does come with a few limitations.
While sale of insurance comes at a lower cost through this channel in comparison to the
agency route and the insurance company gains much through the large bank network
spread across the country the potential can be impeded if bank officials do not actively
generate leads.
Also it is yet to be seen how far buying shelf space in a bank helps push sale of insurance.
Besides the target audience is limited to those individuals who visit the bank during the
working hours. And with technology changing at a rapid pace ATMs and internet banking
have been reducing the individual’s visits to the bank which could perhaps be a dampener
for bancassurance.

Insurance companies are positive about the bancassurance channel raking in volume
business at a low cost and banks have been salivating over the fee-based income that it will
bring. But unless products are simple, easy to understand and easy to market much of the
benefits the bancassurance channel holds, may remain only on paper.

Will Bancassurance Click?

Bancassurance, the much talked about channel of insurance distribution through banks that
originated in France and which has been a success story in Europe is yet to take off here. A
number of insurers have already tied up with banks and some banks have already flagged
off bancassurance through soft launches of select risk products. While reams have been
written about the numerous benefits of bancassurance considering the wide scale
availability of risk products it will enable, rules and regulations regarding the same are yet
to fall in place.

Fee based income:

For banks, bancassurance would mean a major gain. Since interest rates have been falling
and profit on off take of credit has been low all banks have been able to do is sustain
themselves but not profit much. Enter bancassurance and fee based income through
hawking of risk products would be guaranteed.

Unique strategies:

Before taking the plunge, banks as also insurers need to work hard on chalking out
strategies to sell risk products through this channel especially in an emerging market as
ours. Through tie-ups some insurers plan to buy shelf space in banks and sell insurance to
those who volunteer to purchase them. But unless banks set up a trained task force that
will focus on hard-selling risk products, making much headway is difficult especially with
a financial product that is not so easily bought over the counter.
Identifying Target audience:

Besides, identifying the target audience is yet another important aspect. Banks have a large
depositor base of corporate as well as retail clients they can tap. Talking of retail clients
the lower end and middle-income group customers constitute a major chunk who have
over a period of time built a good rapport with the bank staff and thus hold big potential
for bancassurance.

Reduced costs:

While products such as retirement planning will involve an elaborately worked out plan
with the help of a financial advisor, simple products such as an accident cover in other
words pure risk products will be sold through this channel enabling savings on solicitation
costs of these products. So will insurers pass on a part of the gains on cost saving (saving
on agent training etc) to customers? At present insurers are non-committal on this one.
Also there are no

Immediate plans to redesign products to suit the bancassurance channel but banks are
gung-ho about cross-selling products.

Legal issues:

Conversely, the Insurance Regulatory Development Authority (IRDA) has adopted a

cautious approach before Bancassurance is flagged off. While on the one hand it is an
economical proposition to sell risk products through the numerous bank branches spread
across the country the fact that claim settlement disputes take an unusually long time in
our country is one of the causes for worry. In such a situation will banks be in a position to
fight for the cause of their clients is a major concern? Besides regulatory authorities for
both - banks and insurance companies are different. Moreover, banks may have to part
with confidential information about their clients. Now where should banks draw a line?
Bancassurance – What is in store for Customers?

The most immediate advantage for customers is that, in insurance business the
question of trust plays a greater role, especially due to the inbuilt requirement of a
long term relationship between the insurer and the insured. In India, for decades,
customers were used to the monopolistic attitude of public sector insurance
companies, despite there were many drawbacks in their dealing, they enjoyed
customer confidence, this trend continues even now mainly due to their Government
ownership. The customers to move over to private insurance companies that are
collaborated with foreign companies which are less known to the Indian public
would take little more time. The void between the less known newer private
insurance companies and the prospective insured could be comfortably filled by the
banks because of their well established and long cherished relationship. Under these
circumstances, any new insurance products routed through the bancassurance
channel would be well received by the customers. Above all, in the emerging
scenario, customers prefer to have a consolidation and delivery of all financial
services at a single window in the form of ‘financial super market’, irrespective of
whether financial or banking transactions, because such availability of wide range of
financial/ banking services and products relieves the customers from the painstaking
efforts of scouting for a separate dealer for each service/ product. Even
internationally, the trend is towards the ‘one-stop-shop’. Customers could also get a
share in the cost savings in the form of reduced premium rate because of economies
of scope, besides getting better financial counseling at single point. Even in the case
of developed countries the financial literacy and financial counseling has been
increasingly stressed in recent years, these become essential especially when
decision involves long term investments. In India, recently Reddy (2006) has been
emphasizing on the importance and necessity for financial counseling and financial
literature. In that context too the bankers are better placed in extending such
counseling or financial adviser to the customer because of their well-established
long cherished relationship. The relationship between insurer and insured and bank
and its client are different, the former involves taking decisions for long term parting
of money, in such cases counseling is necessary, here too the bancassurance can be
of reassuring for the customer.
 CHAPTER 3.BANCASSURANCE MODELS

I. Structural Classification

a) Referral Model

Banks intending not to take risk could adopt ‘referral model’ wherein they merely
part with their client data base for business lead for commission. The actual
transaction with the prospective client in referral model is done by the staff of the
insurance company either at the premise of the bank or elsewhere. Referral model is
nothing but a simple arrangement, wherein the bank, while controlling access to the
clients data base, parts with only the business leads to the agents/ sales staff of
insurance company for a ‘referral fee’ or commission for every business lead that
was passed on. In fact a number of banks in India have already resorted to this
strategy to begin with. This model would be suitable for almost all types of banks
including the RRBs /cooperative banks and even cooperative societies both in rural
and urban. There is greater scope in the medium term for this model. For, banks to
begin with resorts to this model and then move on to the other models.

b) Corporate Agency

The other form of non-risk participatory distribution channel is that of ‘corporate

agency’, wherein the bank staff is trained to appraise and sell the products to the
customers. Here the bank as an institution acts as corporate agent for the insurance
products for a fee/ commission. This seems to be more viable and appropriate for
most of the mid-sized banks in India as also the rate of commission would be
relatively higher than the referral arrangement. This is prone to reputational risk of
the marketing bank. There are also practical difficulties in the form of professional
knowledge about the insurance products. Besides, resistance from staff to handle
totally new service/product could not be ruled out. This could, however, be
overcome by intensive training to chosen staff packaged with proper incentives in
the banks coupled with selling of simple insurance products in the initial stage. This
model is best suited for majority of banks including some major urban cooperative
banks because neither there is sharing of risk nor does it require huge investment in
the form of infrastructure and yet could be a good source of income. Bajaj Allianz
stated to have established a growth of 325 per cent during April-September 2004,
mainly due to bancassurance strategy and around 40% of its new premiums business
(Economic Times, October 8, 2004). Interestingly, even in a developed country like
US,

Banks stated to have preferred to focus on the distribution channel akin to corporate
agency rather than underwriting business. Several major US banks including Wells

Fargo, Wachovia and BB &T built a large distribution network by acquiring

insurance brokerage business. This model of bancassurance worked well in the US,
because consumers generally prefer to purchase policies through broker banks that
offer a wide range of products from competing insurers (Sigma, 2006).

c) Insurance as Fully Integrated Financial Service/ Joint ventures

Apart from the above two, the fully integrated financial service involves much more
comprehensive and intricate relationship between insurer and bank, where the bank
functions as fully universal in its operation and selling of insurance products is just
one more function within. Where banks will have a counter within sell/ market the
insurance products as an internal part of its rest of the activities. This includes banks
having wholly owned insurance subsidiaries with or without foreign participation. In
Indian case, ICICI bank and HDFC banks in private sector and State Bank of India
in the public sector, have already taken a lead in resorting to this type of
bancassurance model and have acquired sizeable share in the insurance market, also
made a big stride within a short span of time. The great advantage of
This strategy being that the bank could make use of its full potential to reap the
benefit of synergy and therefore the economies of scope. This may be suitable to
relatively larger banks with sound financials and has better infrastructure.
Internationally, the fully integrated bancassurance have demonstrated superior
performance (Krishnamurthy, 2003). Even if the banking company forms as a
subsidiary and insurance company being a holding company, this could be classified
under this category, so long as the bank is selling the insurance products alongside
the usual banking services. As per the extant regulation of insurance sector the
foreign insurance company could enter the Indian insurance market only in the form
of joint venture, therefore, this type of bancassurance seems to have emerged out of
necessity in India to an extent. There is great scope for further growth both in life
and non-life insurance segments as GOI is reported have been actively considering
to increase the FDI’s participation to the up to 49 per cent.

II. Product-based Classification

i) Stand-alone Insurance Products

In this case bancassurance involves marketing of the insurance products through

either referral arrangement or corporate agency without mixing the insurance
products with any of the banks’ own products/ services. Insurance is sold as one
more item in the menu of products offered to the bank’s customer, however, the
products of banks and insurance will have their respective brands too, e.g., Karur
Vysya Bank Ltd selling of life insurance products of Birla Sun Insurance or non-life
insurance products of Bajaj Allianz General Insurance Company.

ii) Blend of Insurance with Bank Products

With the financial integration both within the country and globally, insurance is
increasingly being viewed not just as a ‘stand-alone’ product but as an important
item on a menu of financial products that helps consumers to blend and create a
portfolio of financial assets, manage their financial risks and plan for their financial
security and well-being (Olson 2004). This strategy aims at blending of insurance
products as a ‘value addition’ while promoting its own products. Thus, banks could
sell the insurance products without any additional efforts. In most times, giving
insurance cover at a nominal premium/ fee or sometimes without explicit premium
does act as an added attraction to sell the bank’s own products, e.g., credit card,
housing loans, education loans, etc. Many banks in India, in recent years, has been
aggressively marketing credit and debit card business, whereas the cardholders get
the ‘insurance cover’ for a nominal fee or (implicitly included in the annual fee) free
from explicit charges/ premium. Similarly the home loans / vehicle loans, etc., have
also been packaged with the insurance cover as an additional incentive.
III. Recent Trend of Bancassurance in India

Bancassurance proper is still evolving in Asia and this is still in infancy in India and
it is too early to assess the exact position. However, a quick survey revealed that a
large number of banks cutting across public and private and including foreign banks
have made use of the bancassurance channel in one form or the other in India. Banks
by and large are resorting to either ‘referral models’ or ‘corporate agency’ to begin
with. Banks even offer space in their own premises to accommodate the insurance
staff for selling the

Insurance products or giving access to their client’s database for the use of the
insurance companies. As number of banks in India have begun to act as ‘corporate
agents’ to one

Or the other insurance company, it is a common sight that banks canvassing and
marketing the insurance products across the counters. The present IRDA’s
regulation, however, restricts bankers to act as a corporate agent on behalf of only
one life and non-life insurance company.
In the case of ICICI-Prudential Life Insurance Company, within two years of its
operations, it could reach more than 25 major cities in India and as much as 20 per
cent of the life insurance sales are through the bancassurance channel (Malpani
2004). In the case of ICICI bank, SBI and HDFC bank insurance companies are
subscribers of their respective holding companies. ICICI bank sells its insurance
products practically at all its major branches, besides it has bancassurance
partnership arrangements with 19 other banks as also as many as 200 corporate tie-
up arrangements. Thus, among the private insurance companies, ICICI Prudential
seems to exploit the bancassurance potential to the maximum. ICICI stated that
Bank of India has steadily grown the life insurance segment of its business since its
inception. ICICI prudential had also reported to have entered into similar tie-ups
with a number of RRBs, to reap the potential of rural and semi-urban. In fact, it is a
step in the right direction to tap the vast potential of rural and semi-urban market. It
will not be surprising if other insurance companies to follow this direction.
Aviva Insurance had reported that it has tie-ups with as many as 22 banking
companies, which includes private, public sector and foreign banks to market its
products. Similarly, Birla Sun Life Insurer reported to have tie-up arrangements
with 10 leading banks in the country. A distinct feature of the recent trend in tie-up
arrangements was that a number of cooperative banks have roped in with
bancassurance arrangement. This has added advantage for insurer as well as the
cooperative banks, such as the banks can increase the non-fund based income
without the risk participation and for the insurers the vast rural and semi-urban
market could be tapped without its own presence. Bancassurance alone has
contributed richly to as much as 45 per cent of the premium income in individual
life segment of Birla Sun Life Insurer (Javari, 2006).
Incidentally even the public sector major LIC reported to have tie-up with 34 banks
in the country, it is likely that this could be the largest number of banks selling
single insurance company’s products. Ironically, LIC also has the distinction of
being the oldest and the largest presence of its own in the country. SBI Life
Insurance for instance, is uniquely placed as a pioneer to usher bancassurance into
India. The company has been extensively utilizing the SBI Group as a platform for
cross-selling insurance products along with its numerous banking product packages
such as housing loans, personal loans and credit cards. SBI has distinct advantage of
having access to over 100 million accounts and which provides it a vibrant and
largest customer base to build insurance selling across every region and economic
strata in the country. In 2004, the company

Reported to have become the first company amongst private insurance players to
cover 30 lakh lives.

Interestingly, in respect of new (life) business bancassurance business channel is

even greater than the size of direct business by the insurers at 2.17 per cent. Even in
respect of LIC around 1.25 per cent of the new business is through bancassurance.
Considering the large base, even this constitutes quite sizeable to begin with in the
case of LIC. This speaks for itself the rate at which the bancassurance becoming an
important channel of distribution of insurance products in India. It is significant to
note that the public sector giant LIC which has branches all over India, too moving
towards making use of bancassurance channel
The Win-Win Condition for Banks & Insurance Companies

Banks Insurance

 Revenues and channel of

 Customer retention
diversification

 Satisfaction of more financial

 Quality customer access.
need under same roof.

 Establish a low cost

 Revenue diversification
acquisition channel.

 More Profitable resources

 Creation of Brand Image.
utilization.

 Establish sales orientated

 Quicker Geographical reach.
culture.

 Leverage service synergies

 Enrich work environment.
with Bank.
 CHAPTER 4.BANCASSURANCE IN INDIA - A SWOT ANALYSIS

Even though, banks and insurance companies in India are yet to exchange their wedding
rings, Bancassurance as a means of distribution of insurance products is already in force in
some form or the other. Banks are selling Personal Accident and Baggage Insurance
directly to their Credit Card members as a value addition to their products. Banks also
participate in the distribution of mortgage linked insurance products like fire, motor or
cattle insurance to their customers. Banks can straightaway leverage their existing
capabilities in terms of database and face to face contact to market insurance products to
generate some income for themselves which hitherto was not thought of.

Once Bancassurance is embraced in India with full force, a lot will be at stake. Huge
capital investment will be required to create infrastructure particularly in IT and
telecommunications, a call center will have to be created, top professionals of both
industries will have to be hired, an R & D cell will need to be created to generate new
ideas and products. It is therefore essential to have a SWOT analysis done in the context of
Bancassurance experiment in India.

Strengths

In a country of 1 Billion people, sky is the limit for personal lines insurance products.
There is a vast untapped potential waiting to be mined particularly for life insurance
products. There are more than 900 Million lives waiting to be given a life cover (total
number of individual life policies sold in 1998-99 was just 91.73 Million). There are about
200 Million households waiting to be approached for a householder's insurance policy.
Millions of people travelling in and out of India can be tapped for Overseas Mediclaim and
Travel Insurance policies. After discounting the population below poverty line the middle
market segment is the second largest in the world after China. The insurance companies
worldwide are eyeing on this, why not we preempt this move by doing it ourselves?

Our other strength lies in a huge pool of skilled professionals whether it is banks or
insurance companies who may be easily relocated for any Bancassurance venture. LIC and
GIC both have a good range of personal line products already lined up, therefore R & D
efforts to create new products will be minimal in the beginning. Additionally, GIC with
4200 operating offices and LIC with 2048 branch offices are almost already omnipresent,
which is so essential for the development of any Bancassurance project.
Weaknesses

The IT culture is unfortunately missing completely in all of the future collaborators i.e.
banks, GIC & LIC. A late awakening seems to have dawned upon but it is a case of too
late and too little. Elementary IT requirement like networking (LAN) is not in place even
in the headquarters of these institutions, when the need today is of Wide Area Network
(WAN) and Vast Area Network (VAN). Internet connection is not available even to the
managers of operating offices.

The middle class population that we are eyeing at are today overburdened, first by
inflationary pressures on their pockets and then by the tax net. Where is the money left to
think of insurance? Fortunately, LIC schemes get IT exemptions but personal line
products from GIC (mediclaim already has this benefit) like householder, travel, etc. also
need to be given tax exemption to further the cause of insurance and to increase domestic
revenue for the country.

Another drawback is the inflexibility of the products i.e. it cannot be tailor made to the
requirements of the customer. For a Bancassurance venture to succeed it is extremely
essential to have in-built flexibility so as to make the product attractive to the customer.

Opportunities

Banks' database is enormous even though the goodwill may not be the same as in case of
their European counterparts. This database has to be dissected variously and various
homogeneous groups are to be churned out in order to position the Bancassurance
products. With a good IT infrastructure, this can really do wonders.

Other developing economies like Malaysia, Thailand and Singapore have already taken a
leap in this direction and they are not doing badly. There is already an atmosphere created
in the country for liberalization and there appears to be a political consensus also on the
subject. Therefore, RBI or IRA should have no hesitation in allowing the marriage of the
two to take place. This can take the form of merger or acquisition or setting up a joint
venture or creating a subsidiary by either party or just the working collaboration between
banks and insurance companies.
Threats

Success of a Bancassurance venture requires change in approach, thinking and work

culture on the part of everybody involved. Our work force at every level are so well
entrenched in their classical way of working that there is a definite threat of resistance to
any change that Bancassurance may set in. Any relocation to a new company or subsidiary
or change from one work to a different kind of work will be resented with vehemence.

Another possible threat may come from non-response from the target customers. This
happened in USA in 1980s after the enactment of Garn - St Germaine Act. A rush of joint
ventures took place between banks and insurance companies and all these failed due to the
non-response from the target customers. US banks have now again (since late 1990s)
turned their attention to insurance mainly life insurance.

The investors in the capital may turn their face off in case the rate of return on capital falls
short of the existing rate of return on capital. Since banks and insurance companies have
major portion of their income coming from the investments, the return from
Bancassurance must at least match those returns. Also if the unholy alliances are allowed
to take place there will be fierce competition in the market resulting in lower prices and the
Bancassurance venture may never break-even.
CHAPTER 5.BENEFITS AND VALUE PROPOSITION IN BANCASSURANCE

Advantages to banks

 Productivity of the employees increases.

 By providing customers with both the services under one roof, they can improve
overall customer satisfaction resulting in higher customer retention levels.
 Increase in return on assets by building fee income through the sale of insurance
products.
 Can leverage on face-to-face contacts and awareness about the financial conditions
of customers to sell insurance products.
 Banks can cross sell insurance products E.g.: Term insurance products with loans.

Advantages to insurers

 Insurers can exploit the banks' wide network of branches for distribution of
products. The penetration of banks' branches into the rural areas can be utilized to
sell products in those areas.
 Customer database like customers' financial standing, spending habits, investment
and purchase capability can be used to customize products and sell accordingly.
 Since banks have already established relationship with customers, conversion ratio
of leads to sales is likely to be high. Further service aspect can also be tackled
easily.

Advantages to consumers

 Comprehensive financial advisory services under one roof. i.e., insurance services
along with other financial services such as banking, mutual funds, personal loans
etc.
 Enhanced convenience on the part of the insured
 Easy access for claims, as banks are a regular go.
 Innovative and better product ranges
The other benefits include
 Better customer retention and stronger relationships.
 Clear competitive advantage in the rural areas.
 Possibility that the insurer’s account as well as the accounts from the claimants will
remain with the bank.
 Insurance products can augment the value of the banking products and services.
 Banks are in better position to offer complete integrated financial solutions.

Value Propositions

The services offered by the banks as well as the insurance companies, are related to assets
and risks. They have to be managed. These institutions manage risks and assets for the
customers, reducing and taking over the risks and transforming the assets. The cores of the
businesses are similar, though not same. The basic values offered by banks, Insurance
companies and other financial institutions are indicated below.

Banks offer to its customer’s liquidity (while at the same time making long term loans),
safety, trust (managing estates on behalf of beneficiaries), collection of interest or
dividends payments of commitments (rentals and insurance premiums for example) and
annuities. Insurers primarily protect clients from risks (political, financial, commercial,
business, and human). In life insurance, there is major component of management of an
asset, which is created by the policy. The benefits of the insurer’s expertise in asset
management, passes on the clients by way of premiums levels and bonuses. The liquidity
concerns of insurers are different from liquidity concerns of banks.

Securities firm primarily provide information and advice. They also act as brokers or
agents for the customers, but not take responsibility for risks and assets. Pension funds
manage the saving made directly or through employers and help the pensioners manage
the risks of loss of income in old age. Mutual funds are asset transformers, providing small
savers easy access to complex portfolios of capital market, without sacrificing the needs of
liquidity.

Most customers, big and small, individual and companies are all interested in all these
services. That is the justification for concept of a single window for all financial services.
Bancassurance is a step in this evolution
 CHAPTER 6. MARKETING AND DISTRIBUTION CHANNELS IN
BANCASSURANCE

One of the most significant changes in the financial services sector over the past few years
has been the growth and development of bancassurance. Banking institutions and
insurance companies have found bancassurance to be an attractive and profitable
complement to their existing activities. The successes demonstrated by various
bancassurance operations particularly in Europe have triggered an avalanche of mergers
and acquisitions across continents and efforts are on to replicate the early success of
bancassurance in other parts of the world as well.
Distribution is the key issue in bancassurance and is closely linked to the regulatory
climate of the country. Over the years, regulatory barriers between banking and insurance
have diminished and has created a climate increasingly friendly to bancassurance. The
passage of Gramm-Leach Bliley Act of 1999 in US and IRDA Bill in India in 2000 have
stimulated the growth of bancassurance by allowing use of multiple distribution channels
by banks and insurance companies.
Bancassurance experience in Europe as well as in other select countries offers valuable
guidance for those interested in insurance distribution through the banking channel in
developing markets. Many banks and insurers are looking with great interest at building
new revenue through bancassurance - including large, traditional companies that wouldn't
have considered such an approach about a decade ago. Of particular interest, many believe,
is the potential for bancassurance in developing economies such as those of Latin America
and Southeast Asia.
Distribution channels in Bancassurance
Traditionally, insurance products have been promoted and sold principally through agency
systems in most countries. With new developments in consumers’ behaviours, evolution of
technology and deregulation, new distribution channels have been developed successfully
and rapidly in recent years. Bancassurers make use of various distribution channels:
-Career Agents
-Special Advisers
-Salaried Agents
-Bank Employees / Platform Banking
-Corporate Agencies and Brokerage Firms
-Direct Response
-Internet
-e-Brokerage
-Outside Lead Generating Techniques
The Main Characteristics of each of these channels are:

Career Agents
Career Agents are full-time commissioned sales personnel holding an agency contract.
They are generally considered to be independent contractors. Consequently an insurance
company can exercise control only over the activities of the agent which are specified in
his contract. Despite this limitation on control, career agents with suitable training,
supervision and motivation can be highly productive and cost effective. Moreover their
level of customer service is usually very high due to the renewal commissions, policy
persistency bonuses, or other customer service-related awards paid to them.
Many bancassurers, however avoid this channel, believing that agents might oversell out
of their interest in quantity and not quality. Such problems with career agents usually arise,
not due to the nature of this channel, but rather due to the use of improperly designed
remuneration and/or incentive packages.

Special Advisers
Special Advisers are highly trained employees usually belonging to the insurance partner,
who distribute insurance products to the bank's corporate clients. Banks refer complex
insurance requirements to these advisors. The Clients mostly include affluent population
who require personalised and high quality service. Usually Special advisors are paid on a
salary basis and they receive incentive compensation based on their sales.

Salaried Agents
Having Salaried Agents has the advantages of them being fully under the control and
supervision of bancassurers. These agents share the mission and objectives of the
bancassurers. Salaried Agents in bancassurance are similar to their counterparts in
traditional insurance companies and have the same characteristics as career agents. The
only difference in terms of their remuneration is that they are paid on a salary basis and
career agents receive incentive compensation based on their sales. Some bancassurers,
concerned at the bad publicity which they have received as a result of their career agents
concentrating heavily on sales at the expense of customer service, have changed their sales
forces to salaried agent status.
Platform Bankers
Platform Bankers are bank employees who spot the leads in the banks and gently suggest
the customer to walk over and speak with appropriate representative within the bank. The
platform banker may be a teller or a personal loan assistant and the representative being
referred to may be a trained bank employee or a representative from the partner insurance
company.
Platform Bankers can usually sell simple products. However, the time which they can
devote to insurance sales is limited, e.g. due to limited opening hours and to the need to
perform other banking duties. A further restriction on the effectiveness of bank employees
in generating insurance business is that they have a limited target market, i.e. those
customers who actually visit the branch during the opening hours.
In many set-ups, the bank employees are assisted by the bank's financial advisers. In both
cases, the bank employee establishes the contact to the client and usually sells the simple
product whilst the more affluent clients are attended by the financial advisers of the bank
which are in a position to sell the more complex products. The financial advisers either sell
in the branch but some banks have also established mobile sales forces.
If bank employees only act as "passive" insurance sales staff (or do not actively generate
leads), then the bancassurer's potential can be severely impeded. However, if bank
employees are used as "active" centres of influence to refer warm leads to salaried agents,
career agents or special advisers, production volumes can be very high and profitable to
bancassurers.

Set-up / Acquisition of agencies or brokerage firms

In the US, quite a number of banks cooperate with independent agencies or brokerage
firms whilst in Japan or South Korea banks have founded corporate agencies. The
advantage of such arrangements is the availability of specialists needed for complex
insurance matters and -in the case of brokerage firms - the opportunity for the bank clients
to receive offers not only from one insurance company but from a variety of companies. In
addition, these sales channels are more conceived to serve the affluent bank client.
Direct Response
In this channel no salesperson visits the customer to induce a sale and no face-to-face
contact between consumer and seller occurs. The consumer purchases products directly
from the bancassurers by responding to the company's advertisement, mailing or telephone
offers. This channel can be used for simple packaged products which can be easily
understood by the consumer without explanation.

Internet
Internet banking is already securely established as an effective and profitable basis for
conducting banking operations. The reasonable expectation is that personal banking
services will increasingly be delivered by Internet banking. Bancassurers can also feel
confident that Internet banking will also prove an efficient vehicle for cross selling of
insurance savings and protection products. It seems likely that a growing proportion of the
affluent population, everyone's target market, will find banks with household name brands
and proven skills in e-business a very acceptable source of non-banking products.
There is now the Internet, which looms large as an effective source of information for
financial product sales. Banks are well advised to make their new websites as interactive
as possible, providing more than mere standard bank data and current rates. Functions
requiring user input (check ordering, what-if calculations, and credit and account
applications) should be immediately added with links to the insurer. Such an arrangement
can also provide a vehicle for insurance sales, service and leads.

E-Brokerage
Banks can open or acquire an e-Brokerage arm and sell insurance products from multiple
insurers. The changed legislative climate across the world should help migration of
bancassurance in this direction. The advantage of this medium is scale of operation, strong
brands, easy distribution and excellent synergy with the internet capabilities.
Outside Lead Generating Techniques
One last method for developing bancassurance eyes involves "outside" lead generating
techniques, such as seminars, direct mail and statement inserts. Seminars in particular can
be very effective because in a non-threatening atmosphere the insurance counsellor can
make a presentation to a small group of business people (such as the local chamber of
commerce), field questions on the topic, then collect business cards. Adding this technique
to his/her lead generation repertoire, an insurance counsellor often cannot help but be
successful.
To make the overall sales effort pay anticipated benefits, insurers need to also help their
bank partners determine what the “hot buttons” will be for attracting the attention of the
reader of both direct and e-mail. Great opportunities await bancassurance partners today
and, in most cases, success or failure depends on precisely how the process is developed
and managed inside each financial institution. This includes the large regional bank and
the small one-unit community bank.
Bancassurance Ventures Must Have Clear Objectives

Insurers Banks

Be aligned with good Penetrate client base

Public image of bank further with more products
Forge relationship Leverage positive image
Earlier in customer’s life Increase customer loyalty&
Lower acquisition costs retention

Customers

Buy lower-costs products

Buy more products from a
Single source
Get better, more efficient Service
 CHAPTER 7. KEY DRIVER OF BANCASSURANCE

Elsewhere in Asia has been the following. Banks are seeking ways to raise additional
earnings without commitment of additional capital in a low interest rate environment;
increased competition; reducing margin. Insurance Companies are seeking new customers
using new distribution activities to reach such segment. As noted above, the biggest driver
in India is different at present: banks are seeking an alternative method of redeploying
their surplus workers. Of course, this is a one time only phenomenon.
Therefore, over time, we will see other factors that have played important roles in other
countries will also play out in India. It might be instructive to examine what succeeded in
America for the expansion of bancassurance business. A survey by LIMRA identified the
following elements for success of bancassurance:

 Strength of the Brand.

 Sales Staff Management/Training.

 The Branch Network/Geographical Coverage.

 Bank and Insurance products form a complementary range.

 Single view of the customer.

 Focus on Customer Service/satisfaction.

 Use of Customer Relation Management Tools and Techniques.

 Integration of the bank and insurance organizations producing a single culture.

 Providing advice/solutions, not selling products.

Requirements for success in Bancassurance

 Attractive Insurance Product Base

 Cost-Efficient Distribution System

 Linked and Leveraged Bank and Insurance Products

 Concurrent Sale of Bank and Insurance Products

 Appropriate Structure Based on Level of Integration Between Bank and Insurer

Achieving Success

To achieve success in bancassurance, Asian companies must overcome a host of

challenges. Some are cultural, while others reflect a lack of incentives to generate sales as
well as the natural conflicts between banking and insurance products. The most successful
products from a sales perspective are those that are linked to banking products (e.g., loans
and credit insurance) or that are very similar to banking deposits (certainly in the initial
stages of the bancassurance operation) and offer superior returns to deposits, albeit over a
longer term than the usual time deposits.

Some obstacles are country specific. For example, in South Korea, each bancassurer must
have at least three life partners and three non-life partners, and all of these partners must
receive less than 50% of the new business generated by the bank, in their respective
sectors, in any given quarter.

Not withstanding the many obstacles to success and challenges faced, bancassurance
ventures have enjoyed success in Asia. For example, Exhibit 3 shows the impressive
emergence of bancassurance in Hong Kong. Prior to 1999, market share attributable to
bancassurers was minimal.

To achieve the level of success of bancassurance, banks will need to own insurance
companies or work very closely with insurance company partners to restructure the value
chain and provide products suitable for bank customers. As long as regulatory constraints
exist, alliances will be a critical part of the effort by US banks to establish their insurance
business. Banks must develop successful alliances in the near term and use those
experiences to evaluate the opportunity to buy or build insurance companies as regulations
changes. There are five key approaches to forming insurance partnerships that form a
continuum from complete outsourcing to complete

Ownership: list rental, working with a third party marketer, agency purchase, integrated
alliance, and ownership. Each of these approaches involves a different level of value chain
ownership and control.

The Indian Context

In India, no company is allowed to transact both insurance and banking business. They are
kept separate. In fact, even a company registered, as an insurance has to choose between
life and non-life insurance. It cannot do both. Therefore, the bank in India cannot have the
advantages, which are available in the European context.
There are joint ventures in India between banks and foreign insurers. State Bank of India,
HDFC, ICICI and Vysya bank are example. But apart from a greater willingness to help
each other, the joint venture will not give either party a greater advantage in the other’s
business. The joint venture is an entirely independent unit of operation with separate
personal and funds and subjects to different regulations.
The only way in which banks can be associated with the insurance business in India is by
becoming a corporate agent, for remuneration. The bank can do so far a particular life
insurer and/or particular non-life insurer. The bank cannot develop any of its intimate
contacts with the customers. Since 2000 many banks and insurers have agreed to
arrangement for mutual benefits. The LIC has tied with more than one bank. So also have
other insurers.
For more than a hundred years, insurance business had been sold through insurance agent
and their supervisors. This system had been very satisfactory. The LIC inherited these
system. The efforts to make the agents more professional had not yielded very satisfactory
results, despite incentives and training programs. Many of them continue to treat the
agency business casually, as just a source of additional income. The turnover had been
high and the efforts of replenishing the strength, costly. The banks have skilled staff, to
which the procurement of insurance can reassigned as a duty. This was an opportunity
made available after the regulation of IRDA
 CHAPTER 8.BANCASSURANCE IN DIFFERENT MARKETS

Bancassurance commonly means selling insurance products under the same roof of a bank.
Though bancassurance had roots in France in the 1980s, and spread across different parts
of Continental Europe since, it has spread its wings in Asia – in particular, in India.

In India, there are a number of reasons why bancassurance could play a natural role in the
insurance market. First, banks have a huge network across the country. Second, banks can
offer fee-based income for the employees for insurance sales. Third, banks are culturally
more acceptable than insurance companies. Dealing with (life) insurance, in many parts of
India, conjure up an image of a bad omen. Some bank products have natural
complementary insurance products. For example, if a bank gives out a home loan, it might
insist on a life insurance cover so that in case of death of the borrower, there is no problem
in paying off the home loan.

Bancassurance is: “The provision of a complete range of banking, investment and

insurance product and services, to meet the individual needs of the customers of the bank
and its associates.”
Some Important Bancassurance Tie-ups
INSURANCE
LIFE INSURANCE CORPORATION
(LIC)
BIRLA SUN LIFE INSURANCE
DABUR CGU LIFE INSURANCE
COMPANY PVT LTD
HDFC STANDARD LIFE
INSURANCE CO.
ICICI PRUDENTIAL LIFE
INSURANCE CO.
NATIONAL INSURANCE CO.
BANKS
Corporation Bank, Indian
Overseas Banks, Centurion
Bank, Satara District Bank,
Cooperative Bank, Janata
Urban Cooperative Bank,
Yeotmal Mahila Sahkari Bank,
Oriental Bank of Commerce.
The Bank of Rajasthan,
Andhra Bank, Bank of Muscat,
Development Credit Bank,
Deutsche Bank and Catholic
Syrian Bank.
Canara Bank, Lakshmi Vilas
Bank, American Express Bank,
ABN Amro Bank.
Union Bank of India.
Lord Krishna Bank, ICICI
Bank, Bank of India, Citibank,
Allahabad Bank, Federal Bank,
South Indian Bank, Punjab &
Maharashtra co-operative
Bank.
City Union Bank.
 Karnataka Banks, The
MET LIFE INDIA INSURANCE CO. Dhanalaxmi Bank, Jammu and
Kashmir Bank.

State Bank of India, Associate

SBI INSURANCE CO.
Bank

BAJAJ ALLIANZ GENERAL Krur Vysya Bank, Associate

INSURANCE Bank

Standard Chartered Bank,

ROYAL SUNDARAM GENERAL
ABN Amro Bank, Citibank,
INSURANCE CO.
Amex and Repco Bank

UNITED INDIA INSURANCE CO. South Indian Bank

Bancassurance in Asian market:

Two Asian markets of great interest for their potential size are China and India. Although
their insurance markets are relatively young, bancassurance is now emerging in both
countries.

India opened to private competition only two years ago, and so far 12 life insurers have
entered to compete with the Life Insurance Corporation of India. Three-quarters of these
new entrants have formed relationships with banks (a number with several banking
partners). Some relations are particularly strong, having been established as joint venture
partners. At present, foreigners cannot hold more than a 26% stake. Clearly, bank branches
are an excellent way to extend reach over the huge geographies of
India and China.

In China, the regulatory enforced maximum arrangement fee of 8% between banks and
insurers has led to the vast majority of sales to date being single premium (or short term)
in nature. Furthermore, it appears that relationships at the branch level currently carry
more weight than those at head office, leading to what some observers call “branch
assurance” rather than bancassurance.

As in many markets in Asia, bancassurance in China and India is in its early days.
Nonetheless, bancassurance will surely form an important component of the Asian
insurance landscape.

Bancassurance Across The Globe

Bancassurance" is a term, which first appeared in France after 1980 to define the sale of
insurance products through banks’ distribution channels. But this term does not just refer
specifically to distribution. Other features, such as legal, fiscal, cultural and/or behavioral
aspects form an integral part of the concept of bancassurance. In fact, all these
characteristics combined can explain the marked differences in bancassurance across the
globe. Although it is clearly a predominant feature on some markets, representing over two
thirds of the premium income in Life Insurance, other markets do not appear to have
chosen it as their model.
This type of distribution is predominant in markets such as France, Spain and Portugal,
followed by Italy and Belgium. Bancassurance represents over 65% of the premium
income in Life Insurance in Spain, 60% in France, 50% in Belgium and Italy. -In these
countries, in only ten years, bancassurance has become widely recognized as a successful
model.

In France, in the 1970s, banks had to contend with a mature and highly competitive market
in banking.
By making use of existing legislation in insurance, bancassurance has provided them with
a new source of profit,

Which served to diversify their banking activity and optimize their choice of products,
thereby increasing customer loyalty. Consumers were provided with simple solutions from
a “one-stop shop” addressing all their financial concerns: short-term liquidity, estate and
retirement planning, property purchase, protection against any unforeseen events in
everyday life. In 2000, bancassurance accounted for 35% of Life Insurance premiums;
60% of savings premiums; 7% for Property Insurance and 69% of new premium income in
individual savings. This success has made France the leading individual savings insurance
market in Europe. In terms of premium income, it ranks first in bancassurance.

Spain, like France, is among the most developed markets in bancassurance.

Today, it represents over 65% of life insurance premium income compared with 43% in
1992. However, this high growth rate is not specifically due to bancassurance, rather the
whole of the life insurance market, which has sustained a 30% increase per annum on
average in the past fifteen years. In the last decade, many international, often European,
alliances have been made between banks and insurance groups. This has concentrated the
bancassurance market, which was originally highly fragmented.
On the Spanish market, bancassurance developed more quickly because of the well-
established network of regional building societies, which today account for 50% of Life
insurance premiums in the bancassurance sector.
Bancassurance: Taking the lead

In the last financial year, India has experienced a substantial growth in the life insurance
business. The new business premium growth rate for the financial year 2004-05 over the
previous financial year is 36%. This growth is primarily due to the aggressiveness
witnessed in the private life insurance sector, which grew by 129%.

One of the drivers for this substantial growth is the contribution of the banking industry.
The private life insurers have been instrumental in building strong relationships with
established banks for bancassurance. The bancassurance model, in simple terms means
distribution of insurance products by banks to their customers. Apart from having the
advantage of reaching out to the potential customers at the remotest of places, it offers a
complete basket of financial advice to customers under one roof.

Bancassurance has been a successful model in the European countries contributing 35% of
premium income in the European life insurance market. It contributes over 65% of the
insurance premium income in Spain, 60% in France, 50% in Belgium and Italy.

In the US, the banks were earlier not allowed to sell insurance due to the restrictions
imposed by Glass-Stegall Act of 1933, which acted as a Chinese wall between banking
and insurance. As a result of this life insurance was primarily sold through individual
agents, who focused on wealthier individuals, leading to a majority of the American
middle class households being under-insured. With the repealing of this Act in 1999, the
doors were opened for banks to distribute insurance and cater to the large middle class
segment

In the Asian markets, bancassurance has a limited share of the total sales primarily because
of the near monopoly of the life agents in Japan, which is the largest life market. But there
is a shift in stance with markets like Japan, South Korea and the Philippines where
bancassurance was previously prohibited, taking a more accommodating stance towards
this channel. It has been estimated that bancassurance would contribute almost 16% of the
life premium in the Asian markets in the year 2006 primarily due to the growth expected in
India and China.

In India the bancassurance model is still in its nascent stages, but the tremendous growth
and acceptability in the last three years reflects green pasture in future. The deregulation of
the insurance sector in India has resulted in a phase where innovative distribution channels
are being explored. In this phase, bancassurance has simply outshined other

The Problems in Bancassurance

Any bank getting into business of selling insurance cannot afford to have casual approach
to it. The staff, if deputed from within the existing bank staff, will have to be specially
trained in the intricacies of insurance and the art of salesmanship. These skills will be
required at levels different from the requirements in banking operations. They will have to
be persons who have an external orientation.

The amount of business acquired through the banks depends entirely on the personal skills
of specified persons and the corporate insurance executives. An effective and successful
specified person might perhaps find it more remunerative to branch off as an insurance
agent on his own, instead of being tied to the bank. The options available to the bank to
prevent this may lie in developing attractive compensations packages. The relevant issues
will be the restrictions imposed by insurance Act as well as relative pressures within the
unions of banks of employees.

The commitment of senior management is crucial to the success of the persons deputed for
the insurance work. The priorities for the managers may depend on the criteria by which
they will be appraised at the end of the year. If the progress in insurance is not important
criterion, the support to the insurance activities may be reduced. They would see
mainstream banking activities as more important for their own future growth. The
appraisal and reward systems of the bank have to be appropriately aligned.
 CHAPTER 9.GUIDELINES FOR ENTRY OF BANKS INTO
INSURANCE BUSINESS

1. Scheduled commercial bank would be permitted to undertake insurance business as

agent of insurance companies on fee basis, without any risk participation. The subsidiaries
of banks will also be allowed to undertake distribution of insurance product on agency
basis.

2. Banks which satisfy the eligibility criteria given below will be permitted to set up a joint
venture company for undertaking insurance business with risk participation, subject to
safeguards. The maximum equity contribution such a bank can hold in the joint venture
company will normally be 50 per cent of the paid-up capital of the insurance company. On
a selective basis the Reserve Bank of India may permit a higher equity contribution by a
promoter bank initially, pending divestment of equity within the prescribed period (see
Note 1 below). The eligibility criteria for joint venture participant are as under:-
(a) The net worth of the bank should not be less than Rs.500 crore;
(b) The CRAR of the bank should not be less than 10 per cent;
(c) The level of non-performing assets should be reasonable;
(d) The bank should have net profit for the last three consecutive years;
(e) The track record of the performance of the subsidiaries, if any, of the concerned bank
should be satisfactory.

3. In cases where a foreign partner contributes 26 per cent of the equity with the approval
of Insurance Regulatory and Development Authority/Foreign Investment Promotion
Board, more than one public sector bank or private sector bank may be allowed to
participate in the equity of the insurance joint venture. As such participants will also
assume insurance risk, only those banks which satisfy the criteria given in paragraph 2
above, would be eligible.

4. A subsidiary of a bank or of another bank will not normally be allowed to join the
insurance company on risk participation basis. Subsidiaries would include bank
subsidiaries undertaking merchant banking, securities, mutual fund, leasing finance,
housing finance business, etc.

5. Banks which are not eligible as joint venture participant as above, can make investments
up to 10% of the net worth of the bank or Rs.50 crore, whichever is lower, in the insurance
company for providing infrastructure and services support. Such participation shall be
treated as an investment and should be without any contingent liability for the bank. The
eligibility criteria for these banks will be as under:
(i) The CRAR of the bank should not be less than 10%;
(ii)The level of NPAs should be reasonable;
(iii) The bank should have net profit for the last three consecutive years.

6. All banks entering into insurance business will be required to obtain prior approval of
the Reserve Bank. The Reserve Bank will give permission to banks on case to case basis
keeping in view all relevant factors including the position in regard to the level of non-
performing assets of the applicant bank so as to ensure that non-performing assets do not
pose any future threat to the bank in its present or the proposed line of activity, viz.,
insurance business. It should be ensured that risks involved in insurance business do not
get transferred to the bank and that the banking business does not get contaminated by any
risks which may arise from insurance business. There should be ‘arm’s length’ relationship
between the bank and the insurance outfit.

Notes: -
1. Holding of equity by a promoter bank in an insurance company or participation in any
form in insurance business will be subject to compliance with any rules and regulations
laid down by the IRDA/Central Government. This will include compliance with Section
6AA of the Insurance Act as amended by the IRDA Act, 1999, for divestment of equity in
excess of 26 per cent of the paid up capital within a prescribed period of time.

2. Latest audited balance sheet will be considered for reckoning the eligibility criteria.

3. Banks which make investments under paragraph 5 of the above guidelines, and later
qualify for risk participation in insurance business (as per paragraph 2 of the guidelines)
will be eligible to apply to the Reserve Bank for permission to undertake insurance
business on risk participation basis.
The Legal Requirements

RBI guideline for banks entering into insurance sector provides three options for banks.
They are:

 Joint ventures will be allowed for financially strong banks wishing to undertake
insurance business with risk participation ;
 For banks which are not eligible for this joint-venture option, an investment option
of up to 10% of the net worth of the bank or Rs.50 crores, whichever is lower, is
available;
 Finally, any commercial bank will be allowed to undertake insurance business as
agent of insurance companies. This will be on a fee basis with no-risk participation.

The Insurance Regulatory and Development Authority (IRDA) guidelines for the
bancassurance are:

 Each bank that sells insurance must have a chief insurance executive to handle all
the insurance activities.
 All the people involved in selling should under-go mandatory training at an institute
accredited by IRDA and pass the examination conducted by the authority.
 Commercial banks, including cooperative banks and regional rural banks, may
become corporate agents for one insurance company.
 Banks cannot become insurance brokers.
 CHAPTER 10.SCOPE OF BANCASSURANCE
The Future of Bancassurance

Although bancassurance ventures in Latin America and Asia have followed different
paths, they share the same objectives and requirements for success.
All recognize the value of the bank’s customer base. Bancassurance will eventually take
hold in the US. The objectives announced when Bank One acquired Zurich Insurance
Operation point to bancassurance as a fundamental reason behind the acquisition.
Experiences in both Latin America and Asia may prove valuable to banks and insurers
entering into bancassurance ventures in the US and elsewhere.

Bancassurance in India – Some Issues

The difference in working style and culture of the banks and insurance sector needs greater
appreciation. Insurance is a ‘business of solicitation’ unlike a typical banking service, it
requires great drive to ‘sell/ market the insurance products. It should, however, be
recognized that ‘bancassurance’ is not simply about selling insurance but about changing
the mindset of a bank. Moreover, in India since the majority of the banking sector is in
public sector and which has been widely disparaged for the lethargic attitude and poor
quality of customer service, it needs to refurbish the blemished image. Else, the
bancassurance would be difficult to succeed in these banks. Studies have revealed that the
basic attitudinal incompatibility on the part of employees of banks and insurance
companies and the perception of customers about the poor quality of banks had led to
failures of bancassurance even in some of the Latin American countries.
There are also glitches in the system of bancassurance strategy in the form of ‘conflict of
interests’, as some of the products offered by the banks, viz., ‘term deposits’ and other
products which are mainly aimed at long term savings/ investments can be very similar to
that of the insurance products. Banks could as well feel apprehension about the possibility
of substitution effect between its own products and insurance products and more so, as a
number of insurance products in India come with an added attraction of tax incentives.
In case the Bancassurance is fully integrated with that of the banking institution, it is
suitable only for larger banks; however, it has other allied issues such as putting in place
‘proper risk management techniques’ relating to the insurance business, etc.
As there is a great deal of difference in the approaches of ‘selling of insurance products’
and the usual banking services- thorough understanding of the insurance products by the
bank staff coupled with extra devotion of time on each customer explaining in detail of
each product’s intricacies is a prerequisite. Moreover, insurance products have become
increasingly complex over a period of time, due to improvisation over the existing
products as well as due to constant innovation of new products, emanating from the
excessive competition adding to even more

Difficulties in comprehension of the products and marketing by the bank staff. These can
result in resistance to change and leading to problems relating to industrial relations.

Unlike, the banking service, there is no guarantee for insurance products that all efforts
that a bank staff spends in explaining to a customer would clinch the deal due to the very
nature of the insurance products. This frustration of the bank staff has the danger of
spillover effect even on their regular banking business.
Bankers in India are extremely naïve in insurance products as there were no occasions in
the past for the bankers to deal in insurance products; therefore they require strong
motivation of both monetary and non-monetary incentives. This would be more so in the
emerging scenario due to complex innovations in the field of insurance / pension products
at a rapid pace with the entry of a number of foreign insurance companies with vast
experience in the developed countries’ framework.

In view of the above, reorientation of staff in the public sector banks in particular, to be
less bureaucratic and more customers friendlier would indeed be a challenging task, albeit
it is a prerequisite for the success of bancassurance.
With the financial reforms and technological revolution embracing the financial system,
there has been a great deal of flexibility in the mind set of people to accept change. The
above outlined problems need not, however, deter the banking sector to embark on
bancassurance as any form of resistance from the bank employees could be tackled by
devising an appropriate incentive system commensurate with intensive training to the
frontline bank staff.
Regulatory and Supervisory Issues
With the increased structural deregulation within the financial system and globalization the
banking system in India has been exposed to tough competition compelling them to move
towards not only new vistas of business activity under one roof by moving towards the
‘universal banking framework’ and eventually the emergence of financial conglomerate.
Such developments bring along some regulatory and supervisory concerns. Banks have all
along been functioning strictly on a ‘traditional banking style’ with highly
compartmentalized manner. Now that the banking system enjoys more of ‘structural
freedom’ exposing themselves to non-traditional activities such as insurance, derivatives,
investments banking, etc., there is possibility of migration of risks from the rest of the
activities to the banking system. Thus, the increased market integration and globalization
are demanding new realism on the part of the regulator and supervisor for stricter
prudential regulation and supervisor on ‘inter-sector’ activities especially, considering the
pace with which the system is moving. This process is referred in the literature as
‘structural deregulation’ and ‘supervisory re-regulation’. While it is inevitable that Indian
banks entering into insurance sector, given the size of the transactions in ‘general
insurance transactions’, coupled with the type of built-in risks on the one side and that the
banking system being the focal point of the payment and settlement on the other, any
migration from the former to the latter will have a greater systemic implications. Therefore
adequate and appropriate checks and balances are required to be put in place in time by all
regulatory authorities

Concerned. Going by the international experience and specificity of the Indian system, the
likely problem areas are being enumerated here:

The problem of ‘conflict of interest’ would also arise in a different form; as banks are
privy to a lot of information about the customer, especially in the context of know your
customer (KYC) system being in place, these information could be used by the insurers for
their unfair advantage.
With more integration between and among various constituents of financial sector, there is
greater possibility for ‘contagion effect’.
In India all insurance companies in private sector of recent origin and are in the process of
stabilizing, also highly aggressive due to tough competition. The over ambitiousness
should not smack their own limitation, especially in the case were insurance business is an
internal organ of the universal banking system. Especially in a situation such as large scale
natural calamities, viz., Tsunami, earthquake, floods, etc., would have a serious
debilitating impact on the banking
System, via insurance business. Therefore, the regulation and supervision needs to address
the institution as a ‘financial conglomerate’ rather than each institution individually.
● the regulator of the insurance sector is of very recent origin unlike the banking sector
regulatory authority, viz., RBI. Although IRDA has done appreciable work within the
short period, the regulation itself is a learning experience; any major migration of risk
from insurance to banking would be more devastating if that was not handled
appropriately at the right time.
● in the absence of a unified regulator or a single regulator, the possibility for ‘regulatory
arbitrage’ could not be ruled out. Presently there is no statutory compulsion that the
regulators should part with each other the sensitive information relating to their respective
regulatory areas in order to read the signal, if any, which has systemic implications.
● Differences in the risk characteristics in banking and insurance will persist, relating, in
particular, to the time pattern and degree of uncertainty in the cash flows and that has to be
recognized and appropriately handled.
● The insurers’ internal risk management and control systems for managing their asset
market activities, and credit risk seems to be relatively less transparent unlike the banking
system as also the prudential regulatory and supervisory system towards insurance is
relatively recent one and less rigor as compared with the banking system, especially in the
context of the banking system moving towards the Basel II framework.
● Conflicts of interest between different regulators also could not be ruled out.
● Ensuring transparency and disclosure on activity-wise may be difficult task for the
regulators, albeit it is essential.
● Possibility of abuse of consumers by bankers from being coerced to buy insurance
products against their will need to be guarded, which RBI has been already emphasizing in
its circular.
● Risk of ‘double gearing’ also possible as pointed out by Gently and Molyneux (1998).
● Possibility of banks using the long term insurance funds to meet their short term
liquidity and the problem of asset - liability management also could not be ruled out.

Recognizing the value of sound risk management practices and hence also valuations on
an aggregate portfolio basis - rather than individual instrument basis – would become
essential to achieve alignment of underlying economic realities with financial statements,
as the system is moving towards higher integration of varieties of activities including
insurance.
Success of Bancassurance

Banking and insurance have strong similarities that might have contributed to their
rapprochement, LIC and other insurance companies have developed a range of products,
that have direct conflict with traditional bank offering or products.

New companies in Life Insurance sector would be looking for cost effective channels for
distribution which provide long reach. Because of the existing extensive obviously
emerged as the preferred low cost distribution channel. This would also give the hold to,
insurance companies in the rural areas, thus providing an opportunity to tab the virgin
market.

Banks have large client base and cross selling surely provides with an opportunity for
optimum utilization of their existing customer relationship thus effectively creating a win-
win situation company and the operational difficulties at ground level have to be managed
and one of the suggested ways is to re- structure the bank compensation structure on the
lines of insurance companies.

Last but not the least, the issue of consumer protection will have to be suitably addressed
by Regulators and consumers themselves. Consumers though have consumer Protection
Act to inhibit banks and insurance companies to show monopolistic properties or use them
as an arm twisting techniques. Though all said and done, Regulators both IRDA and RBI
should jointly formulate a policy and process not to avoid the conflict of interest.
Measures to Improve Bancassurance in India

1) Factors that are critical for success include strategies consistent with Banks vision,
knowledge of target customer's defined sales process for introducing insurance services,
simplest yet complete product offerings, strong service delivery mechanism, quality
administration, synchronized planning, all business lines and subsidiaries, complete
integration of insurance with other business products and services, expensive and high-
quality training of sales personnel.

2) Another critical point to be tackled is customer service (CRM). Bank should implement
Customer Relationship Management (CRM) strategies to handle the customers tactfully.

3) Bank should act as financial adviser to the customers in the portfolio decisions and also
assist them in early claim settlement.

4) Bank and insurance company should work jointly towards a model global retail
financial institution offering a wide array of products which leads to creation of one-stop
shop for mortgages, pensions, and insurance products.
 SURVEY REPORT

The above chart states that 31.8% are from age 20 and above, 43.5% are from age between
20to30, 11.8% are from age 31 to 40, 12.9% are from age 41 and above
According to the above chart 65.9% people are male and 34.1% people are female

The above chart states about occupation there are 20% of people who are businessman,
52.9% people are students, 7.1% are retired people and 20% people are salaried
 Above chart tells that 55.3% do not take insurance from same bank in which they
hold bank account whereas 44.7% take insurance from same bank in which they hold bank
account.

The above chart states about from which bank consumers buy insurance policies, 35.3%
buy from public sector bank, 41.2% buy from private sector bank whereas 23.5%
consumers buy from neither of them.
The above chart talks about which type of insurance policy consumers takes from bank,
42.4% consumers buy life insurance, 21.2% consumers buy non-life and 36.5% consumers
buy both.

The chart talks about the objective of taking life insurance policy to which 49.4% buy for
investment motive, 63.5% buy for protection, 41.2% buy for tax benefit and 25.9% buy for
other purpose
The above chart talks about installation mode of preference for making premium payment
in which 43.5% consumers prefer yearly payment, 23.5% consumers prefer half
yearly,16.5% consumers prefer quarterly and 16.5% consumers prefer monthly.

According to the chart from a scale of 1 to 10 12.9% people 10% knowledge about
bancassurance, 9.4% have 20% knowledge, 24.7% have 40 % knowledge, 11.8% have
50% knowledge, 4.7% have 60% knowledge 9.4% have 70% knowledge, 10.6% have 80%
knowledge, 3.5% consumers have 100% knowledge.
According to the above chart 43.5% consumers came to know about bank selling insurance
product through bank employees, 31.8% through emails, 23.5% through academics and
31.5% through relatives and friends.

The above states that 60% consumers prefer to buy policy from bank whereas 30.6% have
moderate and 9.4% have low level of preference.
According to the chart only 3.5% people are highly satisfied by bancassurance service and
only 28.2% consumers are moderately satisfied by the services.

the chart states that consumers mainly think that main motive of bank behind
bancassurance is additional fee income for bank and increase market penentration
 SUGGESTIONS

1. Loyalty and trust attracted many customers towards public sector banks. Banks need
to improve loyalty and trust for better services.

2. There is a need to spread awareness among customers about bancassurance and its
benefits. The customers have taken insurance policy through banks without their
knowledge, and have been compelled to take without knowing the benefit. The bank
employees sold the insurance products to the customers without their knowledge
when thy availed other services like loan or deposit. Most of these cases have
happened in the case of loan, their emergencies and the state of mind which may
have been exploited. These should not be happen. Bank employees must explain the
various investment opportunities and benefits of bancassurance products.

3. The study area urged 100 percent literacy and majority of the customers were
graduates, and prefers to have bancassurance. It is suggested to arrange special
campaign program among college level by bank.

4. Banks may offer the best product to the customers in a low cost and in an effective
way.

5. The bank may improve the efficiency of the bancassurance by giving more emphasis
on practices like security; tax considerations, customer interactions (frequent visit),
trust and loyalty. The suggested bancassurance efficiency model is integrating
knowledge, practice and awareness.
 CONCLUSION

Insurance is basically a customer focused concept selling business where a policy is being
sold to the customer through appropriate channel of distribution. Now a days, agents and
banks are the two widely and important source of distribution to sell insurance products.
The shape of insurance industry is being changed by the development in distribution.
Multi-channel distribution and marketing of insurance products will be the smart strategies
for Indian market. Alternative channels like corporate agents, brokers and banks will play
a greater role in insurance distribution. Bancassurance is one such distribution channel that
offers a huge source of untapped opportunities. The success of bancassurance mostly
depends on how well insurers and banks understand each other’s business. Bancassurance
has grown at different places and taken shapes and forms in different countries depending
upon demography, economic and legislative prescriptions in that country. Economic
growth has strongly supported the expansion of the middle income class in most of the
Asian Countries and now it is India’s turn. Experience reveals that at the initial growing
stage of economy, the primary strongly felt financial need is for the other non – banking
financial products including insurance, derivative, etc. Moreover, India already has more
than 200 million middleclass population coupled with a vast banking network with a large
depositor’s base with that there is a greater scope for bancassurance in India.
 ANNEXURE
A STUDY ON BANCASSURANCE

NAME

AGE
20 AND ABOVE
21-30
31-40
41 AND ABOVE

GENDER
MALE
FEMALE
PREFER NOT TO SAY

OCCUPATION
STUDENT
BUSINESS
SALARIED
RETIRED

1. DID YOU TAKE INSURANCE FROM SAME BANK IN WHICH YOU HOLD
BANK ACCOUNT?
YES
NO

2. FROM WHICH BANK DID YOU PURCHASE INSURANCE POLICIES?

PUBLIC SECTOR BANK
PRIVATE SECTOR BANK
NONE
 3. WHICH TYPE OF INSURANCE POLICY YOU HAVE TAKEN FROM BANK?
LIFE
NON LIFE
BOTH

4. WHAT ARE THE OBJECTIVE OF TAKING THE LIFE INSURANCE POLICY?

INVESTMENT
PROTECTION
TAX BENEFIT
OTHERS

5. WHICH INSTALLATION MODE DO YOU PREFER FOR MAKING PREMIUM

PAYMENT?
YEARLY
HALF YEARLY
QUATERLY
MONTHLY

6. ON A SCALE OF 1 TO 10 HOW MUCH ARE YOU AWARE ABOUT

BANSURRANCE?

1 2 3 4 5 6 7 8 9 10

7. HOW DID YOU COME TO KNOW THAT BANK SELLING INSURANCE

PRODUCTS?

INFORMATION BY BANK EMPLOYEES

BY MAIL/PHONE FROM BANK OR INSURANCE COMPANIES
ACADEMICS
REFERENCE BY RELATIVES, FRIENDS AND COLLEAGUES
8. EXPRESS YOUR LEVEL OF PREFERENCE TO BUY INSURANCE POLICY
FROM BANK?

HIGH
MODERATE
LOW

9. EXPRESS YOUR LEVEL OF SATISFACTION REGARDING BANCASSURANCE

SERVICE PROVIDED BY YOUR BANK

1 2 3 4 5 6 7 8 9 10
DISSATISFIED

10. IN YOUR OPINION, WHAT IS THE MAIN MOTIVE BEHIND

BANCASSURANCE?

ADDITIONAL FEE INCOME FOR BANK

INCREASE MARKET PENETRATION FOR INSURACE COMPANY
CUSTOMER ACCESSIBILITY
BIBLIOGRAPHY

Investopedia.com
Wikipedia.com
Allbankingsolutions.com
Sbilife.co.in

Innovations in Banking and Insurance -Romeo. S. Mascarenhas

Indian Banking -R. Parameswaran